Give, and take

As one of the UK’s leading ethical financial advisers we incorporate our clients’ ethical and environmental views at the heart of our advice process. In many ways our approach to financial planning coincides with that of any other financial advisers: we take our time to understand and evaluate our clients’ circumstances and goals; we accommodate for their attitude to investment risk; we take account of their specific timescales, tax position, commitments and other relevance facts. For those of you who use, or have used a financial adviser in the past, this will be familiar territory. Building on this, the next step is to determine how much money they would ideally like to accumulate in order to achieve such goals. For many people, when asked how much money they would like, a stock, if occasionally flippant, response is for them to reply ‘as much as possible’.  If they accumulate enough to achieve their goals they don’t stop there, they will continue to build and build their financial assets.  If they come into a lot of money they may want to keep it.  They may want to invest it for growth to increase its value still further.  If they run a successful business they will often extract as much money from the company as it can bear. If they have disposable income available at the end of the month they want to save as much of it as possible. All of these examples share a common theme: a desire to maximise what they have.  There is nothing wrong with this approach, and as an adviser we would put a financial plan together to support them in the same way as any mainstream adviser would. However, a sizeable minority of our clients approach things a little differently.  Many of them live fairly frugally and have modest requirements.  They may have saved prudently over the years, often paid off their mortgage, seen their children grow up and become financially self-supporting, and more often than not they have already achieved many of their goals in life, at least the expensive ones, anyway. The point I am making is that being in this position, i.e. with a degree of financial security firmly in place and/or with little possibility of facing challenging financial demands in the future urging them to squirrel away funds ‘just in case’, mean that the demands to focus heavily on their own financial well-being becomes a lot less important.  It means that they can re-focus on how they want to use their money; they have helped themselves, now is the time to really maximise how they help others. Most Gaeia clients are likely to live their day-to-day lives by strong ethical and moral codes and want to take this a stage further by investing their money in the same way.  They believe that a fair world is one where everyone has access to food, water, shelter, a safe environment, health and education, freedom and opportunity. They have been fortunate enough to access these things themselves, and feel it is right to help others do the same.  They often feel too, and this is critical to understand, that they don’t want to have too much money, but instead enough to meet their needs.  If they have too much money then in some way, somebody somewhere, who could really benefit from that money, is missing out. Perhaps, then, they inherit a lump sum of money or receive a cash amount from their pension fund.  It may be a large amount of money, too much in their mind, enough to create a mental dilemma, enough to prompt them to come to us for help. This is where we lay down our pencils, sit back, listen to what they have to say, gently push them and prompt them to tell us honestly how they want to shape their lives, and even occasionally play ‘devil’s advocate’ to make them really think about what they want to achieve and what they’ll do if it doesn’t work out exactly as they plan. We build on that conversation by adding in some numbers.  Are they worried about affording care home fees in the future, and if so what would be the cost of a local nursing home?  Do they want to pass on some of the money to their children or grandchildren, and if so how much? Or are their children financially secure with little dependence on their inheritance? In reality would they like to retire early, and if so, when?  Or perhaps they love what they do and so in reality they’ll never retire, despite all their pension plans indicating that they’ll retire at age 65. By having this conversation, by building up an honest picture, and by fitting in financial amounts, timescales, contingency issues, and so on, we devise an effective ‘financial plan’ for them.  We help them split their money into two parts: one part that helps them achieve their goals, and a second part which they can then view as surplus to requirements; ‘excess’ money if you will. How they use that excess money will also form part of our plan and be open for debate.  Maybe we create a charitable trust for them with them as trustees deciding how to invest the funds and donate any returns to good causes; perhaps they give it away to their children; or they may choose to reduce their hours of work, or retire earlier, which in turn allows them to live a less stressful lifestyle and/or give their time to voluntary causes.   All of these life choices are ones that our clients decide upon from time-to-time and often they will undertake a combination of more than one of them. Whatever the decision, helping clients decide what they need to take from their savings and investments, which in turn helps them identify what they can afford to give away, adds a different dimension to the advice that the average financial adviser probably gives. If you would like financial advice that is effective but considered please do call us to book a meeting with one of our advisers.   HNBlog/190813